National Association of Home Builders Discusses Economics and Housing Policy

Eye on the Economy: New Home Sales Jump in August

New home sales rebounded in August, increasing 18% to a seasonally adjusted annual rate of 504,000, according to estimates from the Census Bureau and HUD. These gains were atop upward revisions for the July pace. The August rate is 33% higher than August 2013 and is a solid indication of the ongoing recovery in the single-family market.

Census reported construction spending declined slightly (0.1%) in August, due to ongoing weakness in the remodeling sector that is attributable to year-over-year declines in existing home sales and the expiration of a energy-efficient remodeling tax credit. Single-family spending increased 0.7% for the month, while multifamily was up 1.4%.

However, housing price increases have hurt affordability for younger buyers and reduced potential yields for investor purchasers. It appears that home price increases will slow over the coming quarters, which will be a positive for first-time buyers. Income growth among younger, potential buyers will also be key.

Recent data from the Current Population Survey suggests that after years of decline, workers under age 35 realized income gains in 2013. Compared to 2012, when this group experienced an almost 1% drop in median income, last year this age group realized a 1.1% increase. Income gains will be critical for accumulating downpayments and qualifying for mortgages, as surveys continue to show that homeownership remains an important goal of Millennials, even if home buying, marriage and other traditional objectives are being delayed.